math, math. (and only then, location)
DESCRIPTION
Betty Kincaid, PMN teaches you how to: -Work with investors to increase your business. -Calculate a property’s rate of return. -Explain to your clients why they should own investment property. -Demonstrate the value of a real estate investment versus stocks or bonds.TRANSCRIPT
Math, Math.(And only then, Location)
Betty Kincaid, PMN
Why work with investors?
What can you do today to double your business?
What’s different about working with investors?
How much will it make?
Rate of Return
Tax Shelter
• Depreciation• Passive loss rules• Long-term capital
gain tax• Tax deferred
exchange
Leveraged Growth
• Offers the ability to borrow large sums
• At fixed interest rates
• For long periods of time
• Compound growth
Cash Flow
• Income• Appreciation• Gain in value due to
owner expertise• Loan amortization
Disadvantages
• Lack of liquidity• Loss of value due to
market• Property hazards
• Management requirements
• Legislation• Unexpected expense• Liability
What could go wrong?
• Liability• Vacancy• Repairs• Tenant Issues
Make Your Money Going In• Below-market acquisition• Terms/Concessions• Stick to criteria• Investment policy• Keep emotions out of the
equation• There are plenty of fish in
the sea• Take action
Types of Return on Real EstateEquity rises as debt is reduced and value increases
Types of Return on Real EstateCash flow rises as debt decreases and rents increase
Commercial Property
Specialty Property
Residential Property
Buy and sell Cash rules
Know your numbers Be flexible Plan for contingencies
Buy and hold Long term
Maximum equity Increase net worth Appreciation & cash
flow
When Analyzing Property
What rents and sells best
Realistic appreciation rate
Realistic vacancy rate
When Analyzing Property
Reasonable fair market rent
Reasonable operating expenses
Realistic projected sales costs
What do you need to know?
ObjectiveRisk vs. ReturnType of Property
Capitalization rate
The rate of return the investor can expect to get from the property.
Not dependent on financing.
Capitalization rate
Net Operating Income_________________
Sales Price
Gross Rental Income-
Operating Expenses=
Net Operating Income
Cash-on-Cash return
The rate of return the investor can expect on his cash investment
Completely dependent on financing
Cash-on-Cash returnNet Operating Income
−Debt service payments
=Income before Taxes_________________Total Cash at Closing
Property #1
4128 Story RockLas Vegas, NV 89115MLS# 1189472
Compare Rates of Return
Property #2
6027 Crumbling RidgeHenderson, NV 89011 MLS# 1147814
Property #3
391 Umbria WayHenderson, NV 89014 MLS# 1131668
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ProfitRick Villani